HIGHLIGHTS
- Dropshipping is the activity of finding customers and connecting with sellers to transact the item without keeping the goods in stock.
- Dropshipping is an effective tool for dropshippers to reduce retail costs such as storage costs, space rental, staff salaries and additional services such as declarations, barcodes, etc.
- The Dropshipping model helps sellers to focus on marketing and promotion, while the supplier will manage everything from logistics, order receipt, to picking and shipping products
FULL ARTICLE
What is Dropshipping?
Dropshipping or dropship has been mentioned for the first time since 1926, but there is currently no official definition for this activity. The Merriam-Webster dictionary describes Dropshipping as “shipping goods directly from the supplier to the customer”. No need to keep stock in the warehouse, dropshippers will send orders information to third party sellers (products suppliers) to ship directly to customers and make a profit.
Unlike normal shipping, as for Dropshipping, the intermediary buys goods from the supplier, finds a buyer, and resells it at a price determined by himself.
Thus, Dropshipping activities only include finding customers and sources of goods based on available demand. It is understandable that Dropshipping is a method where people do not need to invest much money, do not need to import goods or store goods but still can sell products. The seller never even saw or had to handle the item he sold.
Dropshipping profit = Selling price to customer – Purchase price from supplier
How Dropshipping model works:
- Customers: purchase goods, place payment orders;
- Enterprises doing dropship (dropshipper): not owning the goods, they receive and transfer complete information about the order to the product supplier (dropship supplier);
- Dropship supplier: owns the goods, packages the product and ships it to the customer according to the order.
Business objects suitable for the Dropshipping model include: startups, individuals or businesses with little investment capital but want to participate in the e-commerce market. The common point is that they are new to the market, so they will not have much retail experience, warehouse management or just accept a low level of business risk.
Why is Dropshipping strongly hunted?
Cost reduction
Dropshipping is an effective tool for dropshippers to reduce retail costs such as storage costs, space rental, staff salaries and additional services such as declarations, barcodes, etc.
Reducing the factor of ownership of goods
This is an advantage of the Dropshipping sales model as the buyer just needs to connect his sales channel with the supplier’s sales channel and start doing business without importing products. When there is an order, the Dropshipping technical system will automatically push the order and the supplier will deliver the product according to the dropshipper’s order information. This model is very effectively coordinated globally by the wholesale channel Aliexpress and the retail channel Shopify.
Flexible, simple, and easy to implement
Nowadays, when starting a new job with Dropshipping, anyone can do business immediately on the Dropshipping platform without having to wait or go through cumbersome procedures.
This model is very flexible, proactive time, so it is suitable for the majority of sellers. Dropshipping businesses can operate without having to open a manufacturing plant, or even need a warehouse to store goods. All they need are skills, business knowledge, marketing and supporting tools.
Eliminate the burden of inventory
Inventory is first and foremost a huge cost burden for anyone doing business. If it is not possible to consume the majority of the inventory due to many factors such as seasonality, reduced demand, effective strategies of competitors, etc. working capital will be affected. Dropshipping allows you to cut inventory, no need to import goods and still be able to do business conveniently online.
The development of e-commerce helps Dropshipping become a trend to make money online
Strong dependence on e-commerce:
E-commerce platforms like Tiki, Lazada or Shopee allow anyone to open a store and participate in online purchases. The Dropshipping model helps sellers to focus on marketing and promotion, while the supplier will manage everything from logistics, order receipt, to picking and shipping products. Dropshipping has thus quickly become one of the hottest e-commerce trends today.
Today’s e-commerce ecosystem is complete, with all the tools for anyone to try Dropshipping business:
▪︎ Open a virtual store that already has Amazon, Shopify, eBay or Shopee and Lazada.
▪︎ When looking for a source, there are Chinese companies offering them on exchanges such as AliExpress or 1688.com, they are ready to sell even one product at a wholesale price through Dropshipping.
In addition, the service of connecting Dropshipping warehouses with electronic stores is not uncommon. Dropshipper instead of wandering around looking for suppliers, copying product data to update the virtual store, just needs to synchronize goods from AliExpress to his store on Lazada or Amazon.
Rise of Amazon, eBay and Dropshipping Trends in the 2000s:
Amazon and eBay are two of the very few companies that thrived after the “dot-com bubble” of 1995-2001. Two e-commerce platforms have revolutionized the way individuals can sell online. In order to sell products, one no longer needs to go through the expensive technical process of creating an online store and advertising.
For Dropshipping, this is a big change. In the past, dropship suppliers in the US not only charged very high fees for the items they supplied, but also had to spend a huge amount of money in the store development and advertising phases.
But now, Amazon and eBay advertise their websites on behalf of individual sellers, which means that Dropshipping’s popularity is now wider for both large businesses and small individuals.
Dropshipping in Vietnam – an easy and low capital business?
Dropshipping model has also become popular in Vietnam in the last two years. Although the Dropshipping market has great competition, according to business experts, with the growing development of e-commerce platforms and social networks, Vietnam is still a potential place for you to start doing it.
Low investment capital, low risk, these two factors have attracted many young people, startups who want to make money from the Dropshipping business model. However, many people therefore mistakenly believe that this is a fast, easy money-making business model with high profits.
In fact, like other business models, Dropshipping also has risks. There have been many cases where Vietnamese dropshippers do not know the quality of the goods listed for sale, plus they are passive in the supplier’s storage, inventory management or shipping. Therefore, the reputation of the person doing Dropshipping can be affected when there is a problem with product quality and delivery process.
Regardless of the form of business, there are risks for investors, so when starting a business, you must learn carefully about the model, operation method as well as how to respond to unexpected situations. arrive.
At the present time, Vietnam is being considered an ideal market for Dropshipping when e-commerce is thriving, the demand for online shopping is increasing after the pandemic. Although the return is not as high as other models, requiring a lot of patience, Dropshipping is still a good business model because it requires little initial investment cost (and therefore less risk).
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